Small Private Sector Providers in Water Supply and Sanitation –
an overview and some experiences from the World Bank and WSP
Meike van GinnekenSr. Water and Sanitation Specialist, World Bank
With thanks to Ede Ijjasz & Ella Lazarte (WSP) & MukamiKariuki (World Bank)
OECD Global Forum on Sustainable DevelopmentParis - November 29-30, 2006
Overview
Why bother?What kind of SPSPs are where?
What good practices do the World Bank & WSP have working with SPSPs?
What are the policy implications of what we have learned?
Water PPPs by country income categories
Water projects with private participation by income group, 1990-2005
0
5
10
15
20
25
30
35
40
45
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Low income
Upper middle income
China
Low er middle income
Projects
The context: Service levels
source: Global Water Supply and Sanitation Assessment 2000 Report
Urban water supply by type of service by region
Many with house connection still require small providers: India as an example
Accessibility to Water Supply in India: ∼ In 2001 74% of the population had access to a piped water
supply
∼ Water availability is at average of 2.9 hours per day
∼ Connections with 24/7 service in Delhi is 1% (compare to 90% in Jakarta, 88% in Manila, 60% in Colombo)
Source: Bridging the Gap between Infrastructure and Service, World Bank 2006
The water market in an African city
Why focus on SPSPs?
The “ultimate goal” - a household connection for all -depends on much more than service expansion. What to do in the meantime or in the long term?Ignoring the problem has not made it go away – in some countries coverage/access has declined. Is the best the enemy of the good?Put all the cards on the table –you can only “regulate it” once you recognize it Work with what you have - for the unserved or under-served the gaps is being filled by self provision or SPSPs. Reaching the MDGs through SPSPs?
Price of Water by Type of Service Provider
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$5.00
Public Utilities PrivateNetworks
Point-sourceVendors
Tanker Trucks Carters
US
$ p
er C
ub
ic M
eter
PrivatePublic
UnitizedPiped
But there is a lot to do…..
Kariuki, et al, Small-Scale Private Service Providers of Water Supply and ElectricityA Review of Incidence, Structure, Pricing and Operating Characteristics, 2004
Overview
Why bother?
What kind of SPSPs are where?What good practices do the World Bank & WSP have working with SPSPs?
What are the policy implications of what we have learned?
Typology of SPSPs
Dependent SPSPs1.Piped network operator2.Point source3.Mobile distributor
Independent SPSPs4. Piped network operator5. Point source6. Mobile distributor
Utility
13
Consumers
2
54 6
Groundwater/surface water
SPSP Typology – main policy issues
IndependentDependent•Bulk price from utility? tariff structure/pricing, •Ownership of assets - laid at operators cost? •Hold contract/licence? –regulation by utility•Quality of water at point of sale (utility) •Authority to connect new customers – utility or operator
•Exclusivity/Monopoly –what regulation, who monitors?•Develop own source–groundwater abstraction permit? •Licensed to sell? –authority to connect new customers•Quality of water – testing frequency, monitoring
Estimated SPSP Coverage Percentage of households relying on SPSPs
Source:Kariuki et al., 2004
WSS Coverage Levels and SPSP Activity
Source:Kariuki et al., 2004
Additional characteristics
Motivation? – for profit or non-profit, own use (community) or business Organisational form? -cooperatives, self help groups, company, sole proprieter, family businessLegal status? – license, permit, contract with utility, registration with chamber of commerce Financing? – savings, family, commercial bank, loan shark, member fees, customers, micro-credit
Overview
Why bother?
What kind of SPSPs are where?
What good practices do the World Bank & WSP have working with SPSPs?What are the policy implications of what we have learned?
good practices from the World Bank & WSP
Fostering “subdelegation” from utilities to SPSPs∼ Kisumu, Kenya; Medellin, Colombia; Manila, Philippines
SPSPs for construction & operation of sanitation facilities ∼ Ulaanbatur, Mongolia; Mumbai, India
Fitting SPSPs in longer term sector policies∼ Paraguay
Using consumer surveys to inform reform choices ∼ Sri Lanka
Fostering SPSP associations
Subdelegated management models in Kisumu, Kenya
Water Services Coverage
Nyalenda
Existing situation in Kisumu, Kenya
Metered Connections
Illegal Connections
Spaghetti Network
Water contamination risks
Unaccounted for Water
Situation after project in Kisumu, Kenya
Focus on interface between SPSP & utility:Utility sells bulk water to a community private operatorThe selected operator acts as agent for utilityPerformance-based contractProfit-making social enterpriseReduced tariffs/fees
600m
Utility networkBulk supply, metered
Secondary branch Private master operator
Household Meter Chambers
Initial results include increased access to water and decreased prices…
Estimated 2,000 people served by the new operators
Monthly consumption is high at 30 cubic meters due to HH reselling
Fees have been reduced significantly
.02 or .92/cu.m
0.03 or 1.41/cu.m
Cost of water to end consumer
21.1656.41Connection fees
14.1025.40Household meter deposit
0.992.12Household meter rents
New Charges
Old charges
in US$ (1USD=71KES)
Project developed jointly by WSP and AFD, in support of € 20M infrastructure project
Key lessons emerge for scaling up the model in Kenya and rest of Africa…
Institutional: financial and technical support to operators
Increase confidence among stakeholders: utility-master operator-community
Marketing and (utility) communication strategy crucial
Encourage prepayments from community to minimize risk
The Contratación Social Program of Medellinpublic utility
Model: Institutional: direct relationship between utility-community - contract managed by newly-formed local organization that is run like a firm
Social: intensive capacity building
Financial: partly financed by the municipality’s Social Funds
Results (after 5 years):Approximately 41,400 users in five years
149 Contracts with community organizations
Total investment from 1998-2000: USD11.4 M
16,900 hours of training to the communities
6,900 jobs with an average duration of four months
Source: WSP-LAC Seven Cities Project
10 years of experience in subdelegation in Manila
1997: two concession contracts signed for Manila metropolitan area2005: 80% piped network coverage (12 million people)Since 1997, 1.1 million reached through sub networks (third party provision)2005 survey of 183 small providers and 271 of their customers in 5 locations within Manila:∼ 60% had access to piped water supply (38% of these rely on utility
network); 6% neighbors; 7% deep wells∼ Prices are 1.4% - 6.2% higher (compared to 10 - 20% in literature)∼ Prices have fallen since 1997 (tankers from $4/m3 to $2/m3)∼ Small piped networks offer lowest price ∼ Water reselling business is on the rise - treated (bottled) water ∼ Most small providers licensed∼ 58 - 68% SPSPs feel they’ll still be operating in 5 years
Source: World Bank/BNWP report, forthcoming
World Bank support to water and sanitation SPSPs in Ulaanbatar, Mongolia
Ulaanbaatar Services Improvement Project (1997 -2004) resulted in more reliable water supply services to about 140,000 people by connecting water kiosks to the networkSecond project (from 2004) – broaden approach to sanitation:∼ Social assessment showed on-site sanitation is very high on
the list of priorities for residents in the Ger areas∼ World Bank sponsored city wide sanitation plan based on
stakeholder consultation (a novelty)∼ Now pilot in some Ger areas: support to create enabling
environment for scaling-up of implementation of low cost sanitation by community groups
Source: World Bank, 2006a
Going to scale in Mumbai, India: CBO operated community toilet blocks
55% of Mumbai 14M population lives in slums IBRD/IDA $192 million Bombay Sewage Disposal Project (1995-2003) with 6% to Slum Sanitation component provided sanitation services for 400K slum dwellersModel:∼ municipality provide capital to build blocks, community groups
pay for O&M ∼ Community Based Organizations (CBOs) were created;
Municipality issues a building permit after 50% of the community contribution collected and sound plan endorsed by the community
∼ MOU municipality - CBO as service provider: defines standards ∼ CBOs can decide: direct user involvement or use private operator∼ Most of the CBO are performing well, raising enough funds
within their communities to efficiently manage the toilet blocks
Source: World Bank, 2006b
Paraguay: how to fit SPSPs into longer term sector strategy
Traditionally strong presence: 400 aguateros serving 30% of populationWorld Bank Project in rural & town WSS support transformation of SPSPs to formalized operators∼ Aim to attract private sector managers – aguateros, others∼ Competition for small settlements, simplify bidding process/contracts∼ provide financing - output based aid
Urban areas: 2000 law ensures that small systems can be integrated in normal grid∼ SPSPs get 10 year license from regulator; at end of license period, state
can appropriate infrastructure to include in grid∼ SPSP tariffs are regulated∼ Idea is to provide SPSPs clear framework: Jury still out
Source: World Bank/BNWP report, forthcoming
Sri Lanka: how consumer surveys can inform reform choices
2003: Government planned PSP in Negombo and Kalutra-Gallestudy of 1,800 households to inform the design of the transactionKey findings from the study:∼ 60% of poor households rely on wells; 28% on private connection∼ Poor use “unsafe” sources but treat water, quality not judged a problem∼ Poor do not consume significantly less due to free groundwater source∼ Diversity among the poor necessitates service differentiation∼ Uptake rate (willingness to connect) with connection fee: 50% overall,
27-32% among poor) instead of 95% assumed∼ Without connection fee: 70% uptake among poor
Conclusion: Access to and use of alternative to piped water as well as household perceptions and attitudes are critical in determining whether a household will connect to the network
Source: Van Den Berg, 2005
SPSP associations can play an important role: mutual support, voice to govts, utilities & donors
Association of tanker drivers in Kathmandu, Nepal first created to help members confront police harassmentalso supported members involved in accidentsassisted tankers to get registeredTried to install a shared borehole and treatment plant – but this failed and led to the association dissolving
Association of standpostoperators in Ouagadougou, BFProvides small grants to its members who are celebrating a wedding or baptism Extends credit to members who temporarily cannot pay their water billWill help members deal with troublesome clientsOrganizes members’participation in city-wide events
Association of 150 SPSPsin Bandung, Indonesiafee varies according to size association revenues are used to improve road conditions and traffic control ; support members emergency medical care or suffer work-related accidents related accidents; and support community events
Source: World Bank/BNWP report, forthcoming
Overview
Why bother?
What kind of SPSPs are where?
What good practices do the World Bank & WSP have working with SPSPs?
What are the policy implications of what we have learned?
Policy implications: Understand the market and consumers preferences
Review existing service delivery arrangementsWhat sources do the poor currently use – are they likely to move from existing sources to utility serviceWho provides them with WSS services – is the utility well placed to offer better servicesHow well are these services being provided – “drinking” water quality is a priority for poor
Assess customer preferencesWhat are they willling to pay for an improved service – both consumption and connectionWhat is the nature of “improvements” they seek (if any) -affordability, volume, service level, reliability, in house facilities
utility expansion may not be the logical next step!
Policy implications: Understand the utility’s supply constraints
Review the “primary” utilities plans and constraints – what is a realistic timeframe for meeting the goal of universal piped water supply? Expansion plans – need to increase production capacity, extend distribution networkPerformance with respect to improving cost recovery, revenue generation, achieving 24/7 service, reducing NRWExternal constraints – slum policy, land tenure, subsidy policy, etc., - and options for sidestepping themFinancial implications for accelerating service coverage –who will pay for expansion
Policy implications: Understanding small scale service providers
Third party provision can be a useful means of scaling up servicesAs a short to medium strategy, plan for and involve existing service providers, but find ways to improve their efficiency to the benefit of customersDistinguish between various providers: ∼ Independent/dependent∼ Motivation? – for profit or non-profit, own use (community) or
business ∼ Organisational form? -cooperatives, self help groups, company, sole
proprieter, family business∼ Legal status? – license, permit, contract with utility, registration with
chamber of commerce ∼ Financing? – savings, family, commercial bank, loan shark, member
fees, customers, micro-credit
Policy implications: what can we do more?
Sanitation, sanitation, sanitationEstablish appropriate country framework – Policy, legislation, regulations, standards allow for and regulate SPSPsBuild capacity for engaging small-scale providers – contract design, training, competition, guaranteesImprove quality and use of information collected - household surveys often not qualified (secondary sources)Foster community participation - Adapt to local context, involvement in planning & monitoring, tap local resourcesEnable monitoring - regulation or facilitation, establish benchmarks to improve service quality
Thank you !
This is work in process, more info:
www.worldbank.org/watsanwww.wsp.org